An Individual Voluntary Arrangement (IVA) is a formal, legally-binding debt solution plan. It is an alternative to bankruptcy for individuals who are struggling to repay their debts.
An IVA is an arrangement made between you and your creditors that most commonly, allows you to pay one affordable monthly sum, which will then be distributed to your unsecured creditors on a pro-rata basis. What you pay is calculated according to your income & expenditure, allowing you to live your life reasonably and without creditor pressure, as an IVA prevents creditor threats and bailiff action. An IVA is available for anyone looking to avoid bankruptcy.
However, for IVAs’ to be most cost effective, the debt needs to be over £10,000. For smaller amounts, debt management plans or Debt Relief Orders may be more appropriate.
When considering an IVA - and if accepted by your creditors - it becomes a binding contract and will have a negative impact on your credit rating, although if you have already been struggling with your finances, your credit rating may already be damaged.